Spending watchdog chief “shocked” at qualified audit reports at local public bodies

The head of the National Audit Office has said he is “shocked” by the persistent high level of qualified audit reports at local public bodies.

Amyas Morse said: “A qualification is a judgement that something is seriously wrong, but despite these continued warnings, the number of bodies receiving qualifications is trending upwards.

“Let us hear no cries of ‘where were the auditors?’ when things go wrong. The answer will be ‘they did the job, but you weren’t listening’.

“This is not good enough; local bodies need to address their weaknesses, and departments across government should ensure they are challenging local bodies to demonstrate how they are responding.”

Morse’s comments came as the NAO published a report, Local auditor reporting in England in 2018, which found that the number of NHS and local government bodies with significant weaknesses in their arrangements for delivering value for money for taxpayers was “unacceptably high and increasing".

Auditors gave unqualified opinions on local bodies’ financial statements from 2017-18, although opinions at 16 local government bodies have yet to be issued, the report said. “This provides assurance that they are accounting properly for their income and expenditure, and is consistent with the position since 2015-16.”

However, the NAO added that auditors had identified significant weaknesses in an increasing number of local bodies’ arrangements to secure value for money, up from 170 (18%) in 2015-16 to 208 (22%) in 2017-18.

This increase varied between local government and NHS sectors. The number of local government bodies receiving qualified conclusions was 40 (8%) in 2015-16. In 2017-18, and with 20 conclusions still to be issued, 40 (8%) qualified conclusions had been issued overall, but 18% of single tier local authorities and county councils received a qualification. In the NHS, the number rose from 130 (29%) to 168 (38%) across the same period.

The NAO said that the powers of local auditors to issue a public interest report or issue recommendations that local bodies must consider publicly, such as recommending that bodies produce more detailed and realistic savings plans that take account of key risks, had only been used infrequently, with only three Public Interest Reports and seven Statutory Recommendations being issued since April 2015.

“There is no direct consequence of receiving a ‘non-standard’ report from a local auditor,” the watchdog noted. “While departments responsible for the oversight of local bodies may intervene in connection with an issue, such as failure to meet expenditure limits, there are no formal processes for reporting publicly whether bodies are tackling these issues.”

The NAO said government departments used information from local auditors’ reports to differing extents to inform their understanding of the issues local bodies were facing, but they also needed to be able to challenge local bodies to demonstrate that they were taking appropriate action where necessary.

The watchdog said that given increasing financial and demand pressures, local bodies needed to take prompt and effective action to strengthen their arrangements and improve their performance when issues were raised.

“The proportion of bodies with insufficient plans for keeping spending within budget or who have significant weaknesses in their governance, is too high,” it argued.

“This is a risk to public money and undermines confidence in how well local services are managed. Local auditors need to exercise the full range of their additional reporting powers, especially where they consider that local bodies are not taking sufficient action.”